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40 terms

Chapter 1 - Introduction to Accounting

from Hospitality Industry Financial Accounting, Third Edition
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accounting
The process of identifying, measuring, and communicating economic information to permit users to make informed judgments and decisions
accounting systems
The branch of accounting that covers the review of a firm's entire information system, not just the accounting system
accrual basis accounting
System of reporting revenues and expenses in the period in which they are considered to have been earned or incurred, regardless of the actual time of collection or payment
adjusting entries
Entries required at the end of an accounting period to record internal adjustments of various accounts due to the matching principle of accounting
assets
Resources available for use by the business - that is, anything owned by the business that has monetary value
auditing
The branch of accounting that examines a firm's financial statements and internal controls for the purpose of expressing opinions regarding the financial statements
balance sheet
Statement of the financial position of the hospitality establishment on a given date, giving the account balances for assets, liabilities, and ownership equity
bookkeeping
The recording and classification of transactions
business entity principle
An accounting principle that requires a business maintain its own set of records and accounts that are separate from other financial interests of its owners
cash basis accounting
System of reporting revenues and expenses at the time they are collected or paid, respectively
conservatism principle
An accounting principle that requires accounting procedures that recognize expenses as soon as possible, but delay the recognition of revenues until they are ensured
consistency principle
An accounting principle that requires that once an accounting method has been adopted, it should be followed from period to period in the future unless a change in accounting methods is warranted and disclosed
continuity of the business unit principle (going concern principle)
The assumption in preparing the accounting records and reports that the business will continue indefinitely and that liquidation is not a prospect
corporation
A form of business organization that provides a separate legal entity apart from its owner or owners
cost accounting
The branch of accounting dealing with the recording, classification, allocation, and reporting of current and prospective costs in order to aid operations personnel in controlling operations
cost principle
An accounting principle that requires recording the value of transactions for accounting purposes at the actual transaction price
double taxation
This occurs when both corporate profits and dividends paid to stockholders are taxed
expenses
Costs incurred in providing the goods and services offered
financial accounting
A branch of accounting dealing with recording, classifying, and summarizing transactions involving revenues, expenses, assets, and liabilities
financial audit
An independent, external audit
full disclosure principle
An accounting principle that requires that a business's financial statements provide information on all the significant facts that have a bearing on their interpretation
fundamental accounting equation
The equation upon which all double-entry bookkeeping is based: Assets equal liabilities plus owners' equity
general partner
The member(s) of a limited partnership who has (have) unlimited liability for the debts of the partnership
income statement
A report on the profitability of operations, including revenues earned and expenses incurred in generating the revenues for the period of time covered by the statement
liabilities
Claims to a business's assets by parties external to the business
limited liability company
An unincorporated business entity that is not restricted to one class of stock and may have any number of owners. It combines the corporate feature of limited liability with the favorable tax treatment of partnerships and sole proprietorships.
limited partner
The member(s) of a limited partnership who has (have) limited liability. They may not actively participate in managing the business.
limited partnership
A partnership in which one or more of the partners have limited liability; there must be at least one general partner
limited liability
Generally when liability is limited to the amount invested in a business; protects personal assets from the firm's creditors
managerial accounting
The branch of accounting that provides information to various management levels for the enhancement of controls, usually in the form of budgets
materiality principle
An accounting principle that states that only items that are "material" or that "make a difference" should be presented in financial statements
objective evidence principle
An accounting principle that states that all accounting transactions and the resulting accounting records should be based on objectively determined evidence to the greatest extent possible
owners' equity
Financial interest of the owners of a business in that business - equal to assets minus liabilities
partnership
An unincorporated business owned by two or more individuals. Owners co-own all the assets and liabilities of the business and share in some manner in its profits or losses.
revenues
Inflows of assets resulting from sales of goods or services to customers
S corporation
A type of corporation in which profits are taxed in the same manner as those of a partnership, avoiding double taxation
sole proprietorship
An unincorporated business entity that is owned by a single individual.
statement of cash flows
A statement that reflects the cash inflows and outflows of a business for a period of time
tax accounting
The branch of accounting dealing with the preparation and filing of tax forms with the various governmental agencies
unit of measurement principle
The accounting principle that requires financial data to be recorded with a common unit of measure (e.g. the U.S. dollar)